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Washington State Land Lease (3-WA-d)

Information current as of 2020
In Washington, a person (developer) may need a State Land Lease (Lease) from the Washington State Department of Natural Resources (WSDNR) if a project requires access to state-owned land. WSDNR oversees the land leasing process through the Commissioner of Public Lands (“Commissioner”). The WSDNR may lease state lands for purposes it deems advisable, including commercial, industrial, residential, agricultural, and recreational purposes. Wash. Rev. Code § 79.13.010(1). This Lease process is directed at developers requiring use of the state lands as opposed to mere access across them.

Some state-owned lands in Washington are managed by the Washington State Department of Fish and Wildlife or Washington State Parks. If the state land is managed by an agency other than WSDNR, the developer must obtain permission from that agency to access the land. WSDNR keeps current information about which lands are managed by WSDNR on the WSDNR GIS Website.

State Land Lease Process

3-WA-d.1 to 3-WA-d.3 – Contact WSDNR

A developer seeking a Lease should first contact WSDNR and have a discussion with WSDNR about their proposal. The discussion does not need to go into significant depth, but must outline the major points of the developer’s proposal. If WSDNR is satisfied by the proposal after the initial discussion, WSDNR may send the developer the appropriate application form for the developer to complete and submit to WSDNR. Leasing and contact information for energy developers seeking to lease state land from WSDNR can be found on WSDNR’s Energy Project Land Leasing Website.

The application must be submitted on the form provided by the WSDNR and must include the appropriate application fee. Wash. Admin. Code § 332-22-030(4). If the developer wants to lease state lands that are currently leased, the developer should wait until the current Lease is within 120 days of expiration, otherwise WSDNR will reject the application. Wash. Admin. Code § 332-22-030(1). However, lands can be leased for multiple purposes, and the developer may be able to lease land with a current lessee. Additionally, if the developer’s proposed use would bring higher revenues, WSDNR may be able to cancel or reduce a current Lease, if that Lease includes a “higher and better use” clause. Whether to cancel or reduce a current Lease is left to WSDNR’s discretion.

If the developer submits and application that is incomplete, WSDNR returns the application requesting that the developer submit and application that is complete in order to be considered as a lessee.

3-WA-d.4 to 3-WA-d.5 – Determine Whether an Auction is in the State’s Best Interests

The majority of state lands managed by the WSDNR are managed as state trust lands, and WSDNR is under an obligation to manage those lands in a way that achieves the best possible return to the trust beneficiaries. Wash. Rev. Code § 79.13.010(1);Wash. Admin. Code § 332-22-010. In order to achieve the best possible returns, WSDNR decides whether to negotiate the Lease with the developer, or to put the land in question on auction, and lease to the highest bidder.

Note: If the land is being used for a particular use for the first time, then WSDNR must conduct a public auction before leasing that land, unless the specified use is commercial, industrial or residential.

In deciding whether an auction is necessary, WSDNR first inspects the land and establishes an appraised value for the land. Wash. Rev. Code § 79.13.040; Wash. Rev. Code § 79.13.160. WSDNR will not award a Lease for less than the appraisal value. Wash. Rev. Code § 79.13.140(1).

WSDNR ultimately uses its discretion to determine whether an auction would be in the state or beneficiaries’ best interests. Some factors which may influence WSDNR’s decision are:

  • The number of applications received to lease a particular parcel of land;
  • The evaluations done of the parcel of land; and
  • The fair market value of the parcel of land.

Wash. Admin. Code § 332-22-040.

3-WA-d.6 to 3-WA-d.8 – Provide Notice of Intent to Lease

If WSDNR decides to not have an auction and negotiate a Lease with the developer, then WSDNR must publish a notice of intent to lease. This notice must include a legal description and zoning of the property, the office to which applications for a Lease can be made, and the final date to submit a written request to lease. The notice must be published not more than 30 days and not less than twenty (20) days immediately preceding the commencement of Lease negotiations. The notice must be published in two newspapers of general circulation in the locality of the state land that is the subject of the proposed Lease, one of which shall be in the county where the land is located.

Wash. Rev. Code § 79.13.120(2); Wash. Admin. Code § 332-22-070; Wash. Admin. Code § 332-22-105(1)(c).

If WSDNR receives another application to lease the land before negotiations with the developer begin, WSDNR must reconsider whether an auction is necessary. Wash. Admin. Code § 332-22-105(1).

If no other application is received, WSDNR may commence negotiations for a Lease with the developer. If another application is received, but WSDNR decides that no auction is necessary (which is unlikely) and no other applications are received after WSDNR makes its decision, WSDNR may commence negotiations for a Lease with the developer, once the initial notice period is over. Wash. Admin. Code § 332-22-105.

3-WA-d.9 – Provide Notice of Auction

If WSDNR decides an auction is in the state or beneficiaries’ best interests, it must give the public 30 days notice of the upcoming auction. This notice must:

  • Include a description of each parcel to be leased and the appraised value of the land;
  • Specify:
    • The place and time of auction;
    • The bid deposit, if any; and
    • The terms and conditions of the Lease;
  • Be posted in some conspicuous place in the county auditor's office and WSDNR’s regional headquarters administering the Lease; and
  • Be published in at least two newspapers of general circulation in the area where the state land subject to the public auction leasing is located.

Wash. Rev. Code § 79.13.120(1).

If the state-land to be auctioned already has a current lessee, WSDNR must provide that lessee with thirty (30) days written notice of the auction. Wash. Admin. Code § 332-22-040(1)(c).

3-WA-d.10 to 3-WA-d.11 – Conduct Auction

When conducting an auction, WSDNR must decide the length of the auction. An auction could take place in the course of a day, or be open for several weeks. The auction can be conducted by oral bidding or by sealed bidding. R.C.W. § 79.13.140. During a sealed bidding auction, bidders are allowed to submit their sealed bids during the time frame given in the auction notice.

If WSDNR elects to use an oral bidding process, WSDNR must schedule the auction between the hours of 10:00 a.m. and 4:00 p.m. PST, and the auction must take place either at WSDNR’s regional office administering the Lease, or in the county where the land is situated if the county auditor is auctioning the Lease. Wash. Rev. Code § 79.13.130.

The developer seeking to acquire the Lease must place its bid during the auction.

3-WA-d.12 to 3-WA-d.13 - Does WSDNR accept the bid?

Once the auction is concluded, WSDNR chooses a lessee. If the auction was conducted orally, the Lease shall be awarded to the highest bidder. Wash. Admin. Code § 332-22-040(4). If the auction was done by sealed bids, the developer bidding the “most acceptable proposal which complies with the criteria set forth in the notice of public auction” shall be awarded the Lease. Wash. Admin. Code § 332-22-040(3). The deposit of the successful bidder is credited to the Lease, and the deposits from unsuccessful bidders are refunded. Wash. Admin. Code § 332-22-040(6).

Note: The Commissioner may reject any or all bids if it is deemed in the best interest of the state. Wash. Admin. Code § 332-22-040(5).

If the developer’s bid is accepted by WSDNR, then it shall be awarded the Lease, subject to agreeing on the final terms. If the developer’s bid was not accepted, it may be able to enter another bid, subject to the auction terms, if the bidding period has not closed.

Note: Even if the bidding period has closed, WSDNR may be willing to listen to the developer’s proposal if the developer can show that their proposal would be in the best interest of the state.

3-WA-d.14 - Do Developer and WSDNR Agree on Terms?

The developer and WSDNR must agree on final Lease terms in order for a Lease to be executed. If there was no auction, this will likely happen during the negotiation process. Wash. Admin. Code § 332-22-105. If there was an auction, WSDNR provides a draft Lease in the notice for the auction. This Lease contains the standard Lease terms and clauses used by WSDNR. WSDNR typically does not let the bidder change any of the terms, and will move to the next highest bidder if the first bidder does not accept the Lease within thirty (30) days. If any changes are made to the standard Lease terms, the Washington State Office of the Attorney General must approve them. Wash. Rev. Code § 79.13.140(6).

If the developer and WSDNR cannot agree on terms, they can continue to negotiate and try to find an acceptable agreement, or stop the Lease process.

3-WA-d.15 – State Land Lease

The Lease between the developer and WSDNR must contain:

  • The specific use or uses of the land to be utilized;
  • Any required improvements to be made to the land;
  • Provisions providing that the rent is payable in advance in quarterly, semiannual, or annual payments as determined by WSDNR, or as agreed upon by the developer and WSDNR;
  • Provisions to protect the department against third-party claims arising from the uses made of the land by the developer;
  • Other terms and conditions as WSDNR deems advisable, subject to review by the Board of Natural Resources, to achieve the purposes of the state Constitution and R.C.W. § 79.13; and
  • If the Lease has a term of more than ten (10) years, a plan of development which includes scheduled completion dates for all required activities, improvements, or other actions.

Wash. Rev. Code § 79.13.030; Wash. Admin. Code § 332-22-110.

WSDNR is allowed to use agents to lease WSDNR-managed lands. If an agent of WSDNR enters into a Lease, then the Lease must comply with the following requirements:

  • The Lease may not exceed a period of one year;
  • The developer is not entitled to compensation for any improvement the developer makes on the land;
  • The agent must cause repairs to be made to the land at WSNDR’s direction; and
  • Rent must be transmitted monthly to WSDNR.

Wash. Rev. Code § 79.13.150(3).

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